Contactless payment: Security and convenience in payment transactions

In an ever-evolving digital world, contactless payment has ushered in a groundbreaking change in payments. It allows consumers to make their purchases quickly and conveniently without the need for cash or physical card insertions. This payment system is based on Near Field Communication (NFC) technology, which allows transactions to be made wirelessly by simply holding an NFC-enabled device at a payment terminal. This blog post highlights how contactless payment works with physical cards and smartphones, with a particular focus on Google Pay™ as a prominent example.

What is contactless payment?

Before we focus on Google Pay and Google Wallet™, let's take a brief look at contactless payment in general. Contactless payment allows consumers to make purchases simply by presenting their credit, debit or other payment cards, or even their smartphone, to a contactless payment terminal. Instead of entering a PIN or providing a signature, the transaction is made quickly and securely through wireless communication between the payment terminal and the payment instrument.

NFC technology: the basis of contactless payment

NFC (Near Field Communication) technology is at the heart of contactless payment and enables fast and secure wireless communication between devices in close proximity to each other. NFC is a form of contactless data transmission that allows two NFC-enabled devices, such as a smartphone and a payment terminal, to communicate with each other simply by holding them within range. Unlike Bluetooth, NFC does not require time-consuming pairing steps and only works within a very tight radius of a few centimetres. This proximity makes NFC a secure method, as potential unauthorised access is made much more difficult.

Tokenisation technology, which is used in many contactless payment services such as Google Pay, ensures additional protection by replacing the actual payment information with unique codes. NFC not only plays a crucial role in the context of contactless payment, but also finds application in other areas, such as the wireless transmission of data, ticketing and the exchange of information between different electronic devices.

Options for contactless payment

Contactless payment is usually made by card or by smartphone or smartwatch.

1. Physical card

Payment cards with contactless NFC technology allow consumers to simply hold their card up to the reader to process the payment. Most modern debit, credit, current and prepaid cards are equipped with the necessary NFC technology. To make a payment by card, the cardholder simply needs to hold the card up to the contactless payment terminal. No PIN entry or signature is required, which speeds up the process considerably compared to conventional card payments.

2. Smartphone or smartwatch

With the introduction of services such as Google Pay and Apple Pay (available soon), you can store their payment cards in digital form on your smartphone or smartwatch and pay by simply holding the phone out. This provides added convenience and allows you to manage multiple payment cards in a single app.

Example: Contactless payment with Google Pay and Google Wallet

What is Google Pay?

Google Pay is Google's digital payment system, which also includes Google Wallet. Here you can securely store your payment cards on your smartphone and make contactless payments. The app is designed to enable seamless transactions both in physical shops and online.

Look out for these icons to find acceptance points for Google Pay:

Functionality and supported devices

The way Google Pay works is simple: users add their payment cards to the app and can then pay at contactless payment terminals by holding their smartphone close to the terminal. Google Wallet is usable on Android devices with at least Android 7.0.

Google Pay security

Security is an essential aspect of contactless payment. Google Pay employs various security measures to protect the privacy and data of its users. These include the use of tokenisation, which does not transmit actual card information, and the ability to authorise payment methods via fingerprint or facial recognition.

Advantages and disadvantages of Google Pay and contactless payment

Advantages

• Fast and convenient transactions
• Low risk of card misuse through tokenisation
• Support for multiple payment cards in one app

Disadvantages  

• Limited acceptance at some shops and locations
• Dependence on smartphone battery life

Steps to set up Google Pay

Setting up Google Pay on a smartphone is straightforward and requires adding payment cards and verifying identity. The app guides users through the entire process. Learn how to use Google Pay with your Circula credit card in our Help Center. You can also use virtual credit cards for this purpose.

Sources

• Verbraucherzentrale: Kontaktlos bezahlen – so geht es und das ist zu beachten
• Google Wallet: Mit dem Smartphone kontaktlos bezahlen
• Deutsche Bundesbank: Kontaktlos – einfach und bequem bezahlen